Is John’s Advertisement an Offer or an “Invitation to Treat”? Essay Example

for breach of contract? Sarah who saw the advertisement wants to buy John’s car for 45, 000 but John rejected it. There is an issue rose whether did John breached the contract or otherwise. As mentioned above, John’s advertisement is an ITT. Sarah is induced by John’s advertisement to make an offer instead of accepting an offer. In this case, Sarah is the offeror while John is the offeree. Sarah offered to buy John’s car at the price of 45, 000. A rejection was made by John. John is said to have breached the contract.

A contract is a legally binding or enforceable agreement between two or more competent parties or entities in which there is a promise to perform or refrain from performing some specified act(s) in return for a valuable benefit known as consideration. Contracts Act 1950 (Act 136) (Revised 1974) An agreement must be met between John and Sarah to enter into a contract. John is selling at the price of RM50, 000 while Sarah is offering to buy at 45, 000. No agreement was met. When John made a rejection, the offer is no longer valid. Therefore there is no contract between John and Sarah and no breach can be made.

Conclusion: John is not liable to Sarah for breach of contract. Is John liable to Farah for breach of contract? On 12. 3. 2012, Farah made an offer to John to buy his car for RM50, 000 in a letter enclosed with a cheque. On 15. 3. 2012, Farah went to collect the car but to find out that John has sold the car and returned her cheque

of 50, 000. John issued for breach of contract. But it is questioned whether did Farah effectively communicated her offer. In this case, Farah is the offeror while John is the offeree. Farah made an offer and communicated it to John.

But was there an effective communication of offer? After Farah has written to John enclosing a cheque, it is vital to ensure that John is aware of the cheque and offer. There cannot be an acceptance when John is not aware of the offer and its terms. Offer is required to be communicated in Contracts act 1950. Ayer Hitam Tin Dredging Malaysia Bhd v Y. C. Chin Enterprises Sdn Bhd –“for there is to be an agreement, parties must be ad idem” Acceptance is when the person to whom the offer is made signifies his assent thereto, the offer is said to be accepted – S2 (b) Contracts Act 1950.

Farah made an offer to John but he did not signify any kind of acceptance to Farah’s offer. Farah must communicate with John regarding her offer to buy the car and John must communicate his acceptance of the offer from Farah. John is not bound until Sarah receives his acceptance. Farah assumes the car is sold to her if she did not hear anything from John within a period of three days. Farah cannot solely assume there is an acceptance from John because according to the S7 Contracts Act 1950, an acceptance must be absolute, unqualified, and expressed in a usual and reasonable manner.

Silence is not a mode of acceptance; John did not signify any form of acceptance therefore she

cannot assume the car is hers. John did not cash out Farah’s cheque of Rm50, 000 which means there is no conduct of acceptance. John then returned the cheque of RM50, 000. There was no acceptance of offer, no agreement met and no contract made. Felthouse v Bindley - “The nephew’s acceptance had not been communicated to the uncle. The horse did not, therefore, belong to him. ” Conclusion: John is not liable to Farah for breach of contract.

Is there a contract between John and Chan? When Chan went to John with 48, 000 cash and tells John he wants to buy the car, an offer was made by Chan to John. When John accepts Chan’s money, an agreement was met and there is an acceptance. According to Contracts Act 1950, the communication of a proposal is complete when it comes to the knowledge of the person whom it is made. In this case, Chan has communicated the offer and John is acknowledged. There is an issued receipt that made the contract enforceable and legal. John is liable to Chan for breach of contract.

Conclusion: Yes, there is a contract. B Can Chan get his refund of RM48, 000 paid to John? Chan made an issue to claim a refund when he is informed that the gearbox of the car is faulty after the sales. An issue arises whether Chan is eligible to claim a full refund for his purchase when he has actually formed a contract with John. A term (Lee and Detta, 2009) is a statement that creates contractual obligations between the parties, a breach of which will result in

the injured party being able to sue.

The terms should be classified into conditions and warranties depending on the intention of the parties. A condition (Lee and Detta, 2009) is a term that is vital to the contract. The injured party may sue for damages if the conditions are breached. On the other hand, warranty is considered as a less important term as compared to the main point of the contract by parties. If the contract is said to be breached, the injured party must continue to perform their part of the contract but they can sue the other party for damages for any loss that they may suffer from the breach.

There were no promises or guarantee promised to Chan before or while entering into the contract. At the time of purchase, Chan did not raise any questions regarding the condition of the car. He did not seek a mechanic to check the car’s condition. The car only stalled after Chan left. The faulty gearbox may be caused by other factors. John did not cause any faulty to the car after Chan bought it and left. John did not mention anything regarding the condition of the car nor did he conduct any misrepresentation by saying an untrue statement to induce Chan into buying the car.

Based on Contracts Act 1950, the parties to a contract must either perform, or offer to perform, their respective promises unless the performance is dispensed with or excused under this Act, or of any other law. In this case, John did not make any promise to give a guarantee or refund to Chan. There is no

breach of condition entitled for Chan to terminate the contract and demand for the return of 48, 000. The term is stated in the back of the receipt in small fine print stating ‘This car is sold on an ‘as is where is basis. The seller will not be liable for any damage to the car howsoever arising.

This term is an exclusion clause. Exclusion clauses, (EC) is a term of a contract inserted by one party to exclude liability or responsibility in the event of breach or carelessness on his part which has caused the other party to suffer losses. In Malayan Thread Co Sdn Bhd V Oyama shipping line Ltd & Anor, there is a clause stating that ‘the shipping company shall not be responsible for any consequences arising or resulting from, inter alia, loss by robberies, theft or pilferages…”. There was no breach of contract because the exemption clauses exonerated the defendant from the responsibility under the contract.

Similarly, John had a clause in the fine print stating “This car is sold on an ‘as is where is basis. The seller will not be liable for any damage to the car howsoever arising’. John is not liable for any damage or problem arising from the post-purchase. Chan’s damage is not caused by John. There was no breach of contract because the clause defends John from the liability to compensate Chan under any circumstances. Chan cannot sue John for breach of condition because there is an exclusion clause to exclude John from being liable for the refund of the car.

The contract cannot be terminated with the existence of the

exclusion clause because the clause is important and vital to the contract. A breach of the condition allows a party to terminate the contract and sue for damages. John did not breach the condition because it was clearly stated that the car is sold by John, and bought by Chan in whatever condition it exists in. Chan may claim a refund of 48, 000 and the contract is voidable if he can prove that there was fraud involved. The receipt issued by John is an unsigned contractual document that is incorporated by exclusion clauses.

As long as a reasonable person would not find terms in it then actual notice of the existence of the exclusion clause must be brought to the attention of the other party. Reasonable steps must be taken to bring notice to the other party. Whether the steps taken were reasonable is a question of fact. Parker v Sth. Eastern Railways Co - “Even though the plaintiff did not read the clause, he was bound by it. Defendants had done what was reasonably sufficient to give him notice of its existence. ” Chan did not read the clause at the back of the receipt and he is bound by it.

In Parker v Sth. Eastern Railways Co, the railway company has done sufficient action to bring Parker’s attention to the existence of the clause. The ticket stated ‘see back’ to bring attention to the party of the exclusion clause. But John did not take reasonable steps to notify Chan about the exclusion clause stated at the back of the receipt in a small fine print. Chan may sue John for

a breach of warranty because he did not take reasonable steps to notify Chan about the exclusion clause. Chan is not entitled to end the contract and claim a refund but he can only sure John for the damages of RM5, 000 to replace the gearbox. Bettini v Gye QBD 183 – “defendant not entitled to end contract but can sue the plaintiff for damages. ” Chan can sue John for breach of warranty to claim RM5, 000.

Conclusion: Chan cannot get the refund of RM48, 000 paid to John.

Bibliography

1. The Commissioner Of Law Revision, Malaysia, 2006.
2. Law of Malaysia Act 316 Contracts Act 1950 Percetakan Nasional Malaysia Bhd. Available at: http://www. agc. gov. my/Akta/Vol. %203/Act%20136. pdf. Lee, M. P., and Detta, I. J. 2009.
3. Business Law. 1st and. Shah Alam, Oxford Nicholson C. A. M. 013, Contract Law – Contents of Contract, Lecture notes distributed in Business Law at Taylors University Lakeside Malaysia, Selangor.
4. Nicholson C. A. M. 2013, Contract Law - Formation, Lecture notes distributed in Business Law at Taylors University Lakeside Malaysia, Selangor.
5. Word Count: 2029 WLR 1204 MLJ 101.2 MLJ 754
6. Word Count: 1037 CBNS 869. MLJ 121  CPD 416 QBD 183